Big oil is aiming to clean up the dirty secret of natural gas
Natural gas is touted as cleanerburning fuel that will replace coal and lower carbon emissions until the global economy completes the transition to renewable energy over the next several decades.
As a result, Big Oil companies are investing many billions of dollars into producing, processing and exporting natural gas, joining a boom in liquefied natural gas from the Texas Gulf Coast to Australia.
But the dirty, not-so-secret problem with natural gas is the release of methane, a potent greenhouse gas, into the atmosphere.
Methane, the main component of natural gas, escapes from pipeline leaks and during oil and gas production, in which excess natural gas often is intentionally burned away, or flared.
Now, the world’s biggest oil companies, including Exxon Mobil, Royal Dutch Shell and BP, and more are pledging to reduce methane emissions and push for more stringent regulations — even as the Trump administration plans to significantly roll back the restrictions and oversight of methane emissions.
“Natural gas does have a chink in its armor and that chink in its
armor is methane,” said Bernard Looney, chief executive of BP’s exploration and production division . “We have to win the battle against methane.”
More than three years after some 200 nations agreed in Paris to work to dramatically slow global warming, the world isn't even close to being on track meet the accord’s goal of keeping a global temperature rise less and 2 degrees Celsius by 2100.
The increasing urgency around climate change has been highlighted at the CERAWeek by IHS Markit energy conference in Houston this week.
Today, young people from around the world will strike and protest the lack of action to address climate change. In Houston, organizers plan a noon rally at City Hall.
To meet that Paris goals, renewable energy must grow dramatically. Natural gas is considered important to making the transition to renewable power not only because it is cleaner, but also because it is flexible.
Gas-fired plants can ramp up and down to fill in for intermittent wind and solar power much more quickly than coal and nuclear plants.
But in June, a six-year study on methane led by the Environmental Defense Fund found annual emission rates from energy companies are about 60 percent more than what the U.S. Environmental Protection Agency projects.
The study estimated the 13 million metric tons of methane emitted each year is the equivalent of about $2 billion in lost natural gas — enough to fuel about 10 million homes.
And, last year, methane emissions grew — especially in West Texas — because of leaks and, most notably, flaring because of pipeline shortages that leave oil and gas producers few other options.
Bob Dudley, BP’s chief executive, said this week that such practices are unsustainable.
“Greenhouse gases are expected to rise by about 10 percent over the next two decades, when they need to be falling dramatically,” he said at the CERAWeek conference.
BP is partnering with the Environmental Defense Fund to develop and deploy technologies and strategies to reduce methane emissions. Meanwhile, an initiative led by European energy majors, aims to reduce its methane emissions 20 percent by 2025.
Exxon Mobil, which joined the five-year-old initiative last year, says it has cut its onshore methane emissions by about 10 percent since 2016.
But executives concede that voluntary efforts will only go so far, because most methane emissions in the industry are produced by smaller independent oil and gas firms. The federal government must continue to regulate methane, Big Oil executives say.
Gretchen Watkins, president of Royal Dutch Shell’s U.S. subsidiary, Shell Oil of Houston, called on the White House to tighten the rules on methane leaks from oil and gas production, rather than roll them back as the Trump administration has proposed.
“We need to do more,” Watkins said.
Environmental advocacy groups such as Earthworks and Greenpeace agreed. They say that the biggest oil companies have certainly not done enough to press the case for tougher regulations with the Trump administration and bring the rest of the industry along.
Big Oil’s methane emission run less than 1 percent of oil and gas production, while the overall industry releases about 1.6 percent of it, according to the Environmental Defense Fund.
The industry trade group, the American Petroleum Institute, largely has supported the Trump rollback.
The API largely supports leaving methane rules to states while promoting voluntary efforts to lower methane emissions. Exxon Mobil CEO Darren Woods is the API Board chairman, but Exxon said discussions with API are ongoing on the topic and that Exxon Mobil is one of many API member companies.
“Regulation is another means of moving industry along, leveling out the playing field and making sure there’s consistent performance,” said Staale Gjervik, president of Exxon’s shale subsidiary, XTO Energy.
Fred Krupp, president of the Environmental Defense Fund, said Big Oil’s pledges on methane are welcome, but regulators need to keep a careful eye on them. Rules are meaningless without adequate enforcement and inspections, he said.
“There’s a difference between making promises and keeping promises,” Krupp said. “We need regulations that are enforced and ubiquitous monitoring to keep the pollution checked and dramatically lowered.”